Want to Increase Your Dividends? Just Ask!

Nathan Slaughter's picture

Thursday, April 27, 2017 - 12:00am

by Nathan Slaughter

If you want to learn how to squeeze even more money out of stocks you already own, then it's time you learn one of the easiest ways.

It's really simple. As you'll see, just by asking, you'll be able to:

-- Grow your money whether the market goes up or down...

-- Buy stocks at up to a 5% discount in some cases...

-- And possibly even turn a small amount of money into a sizeable retirement nest egg -- without adding any additional money from your own pocket.

This isn't a secret per se, but it's not widely known because most firms aren't allowed to advertise it. Since it largely cuts out brokers, Wall Street pressured Congress to make it illegal to publicize them.

Fortunately, you can use this wealth-building program as early as today, and in most cases you can use your existing brokerage account.

I doubt you'll see this program advertised on your broker's website. But it's there -- you just have to know where to look.

Never Worry About Timing The Market Again
First, in order to grasp how powerful this is, you have to change the way you think about investing.

Most people believe investing is a crapshoot. You win some, you lose some. Stocks jump up and down, and it's your job to get the most out of this rollercoaster ride by timing the market.

Wrong.

Today, I want you to forget all that. Instead, think of the stock market as an opportunity to grow your wealth no matter what's happening in the world.

High interest rates or low interest rates... inflation or deflation... war in the Middle East or tension between superpowers... whatever's going on, you can grow your retirement nest egg. And you don't have to worry about timing the market.

How do you do this?

By letting your dividends work for you.

In other words, you can use your dividends to protect yourself from market volatility, and from the disruptive macroeconomic events.

The easiest way to do that is by letting them compound...

The Great Secret To Lasting Wealth
Compounding is one of the great investing secrets. It doesn't get much attention because it doesn't have a catchy name, but it's the key factor that helps the rich get richer.

If you're not using compounding, then it's going to be hard for you to earn lasting wealth. You'll be dependent on timing and playing the market as if it were a lottery. That's a loser's game.

Here's how powerful compounding can be...

If history is any guide, you can expect your investments to grow 4%, 6% or even 8% annually. A 6% gain on a $50,000 portfolio may not seem like much, but 6% year after year on an ever-rising base of assets starts to really sizzle. That's compounding in a nutshell. You may tend to think of it more when it comes to savings accounts or other interest-bearing items, but it also works with investments.

For example...

Suppose you set aside $6,000 this year (assuming you're 40 years old in this example). In addition to the 6% gain on the first year's investment, let's suppose you put in another $6,000 in the second year. Keep it up for five years and you've bagged $3,800 in gains in addition to the $30,000 you've put in.

A Decent Gain
Age Balance
40 $6,000
41 $12,360
42 $19,102
43 $26,248
44 $33,823

Now let's say you keep it up for another 10 years, picking up 6% annual gains on the nest egg along with another $6,000 in freshly injected funds each year. Now compounding is really starting to pick up. You've put in $90,000 ($6,000 a year times 15 years), but also have a nearly $50,000 gain to show for your efforts.

Getting Better
Age Balance
45 $41,852
46 $50,363
47 $59,385
48 $68,948
49 $79,085
50 $89,930
51 $101,220
52 $113,293
53 $126,090
54 $139,656

The next 10 years, your results are better still. You've now put in $150,000 ($6,000 a year times 25 years), but made even more than that in profits. When you're looking at 6% gains on $300,000, you're talking about stellar gains.

Better Still
Age Balance
55 $154,035
56 $169,277
57 $185,434
58 $202,560
59 $220,714
60 $239,956
61 $260,354
62 $281,975
63 $304,893
64 $329,187

And if you stick with it for 10 more years, you'll now be sitting on a really impressive pile of cash.

Strong Annual Returns
Age Balance
65 $354,938
66 $382,235
67 $411,169
68 $441,169
69 $474,349
70 $508,810
71 $545,339
72 $584,059
73 $625,103
74 $668,609

By the time you hit 74, you'll be bagging nearly $40,000 in annual gains -- far higher than the $6,000 you've been injecting each year.

What's more, compounding also gives you more time to enjoy life. You don't have to be glued to the finance channels looking for the next "hot" stock. And you don't have to worry about what's going on in the Middle East, China or South America -- you're portfolio's largely unaffected by all that.

How to Use Dividend Reinvestment to Start Building Real Wealth
Clearly, compounding can have a profound effect on your net worth. And it's the first thing you need to understand if you're going to use this system.

The second thing you need to understand is that the easiest way to benefit from compounding is by reinvesting your dividends.

Dividend reinvestment is amazingly simple, yet tremendously powerful. Here's how it works...

Instead of cashing your dividend checks every month or quarter, you simply plow them back into your investments to buy more shares. Those dividends then turn into more dividends, which turn into even more dividends, and so on and so on...

In other words, you earn "bonus dividends" that produce more income... and you don't have to pay a nickel out of pocket to buy them.

For example, say you own 1,000 shares of AT&T, which currently pays a $1.96 annual dividend. You'll make $1,960 (1,000 shares multiplied by $1.96) in annual dividend payments. However, if you reinvest that $1,960, it will go straight towards the purchase of more shares.

At today's prices, that will get you roughly 50 more shares. So by year's end, you will own 1,050 shares... 50 more shares than you started out with... and you won't have to pay a dime for them.

And the $1.96 dividend, multiplied by the now higher number of shares you now own (1,050), means next year's dividend payments will rise to $2,058 (1,050 shares multiplied by $1.96).

Again, you're dividend income grows... and it doesn't cost you anything.

As long as the company keeps paying its dividend, this continues every year, with each year's dividend pile larger than the previous year's.

This is the simple but powerful notion of compounding. If you start reinvesting today, you'll be at the start of long virtuous cycle that boosts the amount of new shares you own each passing year.

Unfortunately, many investors don't take advantage of it because it's not advertised much. That's because of the restrictions mentioned earlier. However, there's a very simple way to jump through Wall Street's loopholes and start reinvesting dividends today.

Just ask.

It's that simple. If dividend reinvestment isn't a readily available option when you log in to your brokerage account online, then call the customer help line. If it has a "Live Chat" icon, then use that to chat with a representative. Either way, once you're connected with someone, simply ask "Can I start a Dividend Reinvestment Plan?"

And that's pretty much it.

Within a few minutes, the representative will get you started on a Dividend Reinvestment Plan -- or DRIP, as it's commonly known -- and your dividends will start multiplying.

You won't realize it immediately, but you'll have started a chain reaction that can lead to bigger gains down the road. The amount of shares you own will grow... you'll be able to make money whether the market goes up or down... and you'll save a bundle in brokerage fees.

Put It On Auto-Pilot... And Watch The Money Roll In
Starting a DRIP is very simple, and it's a great way to safely grow your wealth for a long time.

Once you've opened a DRIP with your broker, the program goes on auto-pilot, and you can just sit back and watch the number of shares you own steadily build. Your broker will take the proceeds of any dividend payments and apply them to additional share purchases.

Companies really like DRIPs. They see these programs as a sure-fire way to build long-term shareholder loyalty, and also appreciate the simple and transparent way these programs are conducted.

What's more, to help lure investors to DRIPs, dozens of companies will even offer up a modest discount on your DRIP purchases, ranging from 1% to 5% off of the current share price.

In other words, not only do DRIPs allow you to get more shares basically for free... they also let you buy shares at a discount.

If you're not using one, now could be a great time to start.

P.S. Compounding through dividend reinvestment is just one of the ways you can safely maximize your income no what is going on in the world. Another is by giving my premium newsletter, High-Yield Investing, a risk-free trial.

At High-Yield Investing, you'll find all sorts of tips and tricks to maximizing your dividends in today's environment. You'll also gain access to dozens of picks that most investors completely miss out on. If you're interested in building a safe, high-yielding portfolio that throws off thousands of dollars in extra income every year, click here.

Nathan Slaughter does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.